- Apple’s major tax win means nothing stands in its way.
- Investors betting against the company’s shares have been officially burned.
- Bank of America raises its target price as investors begin using the stock as an investment tool.
Apple (NASDAQ:APPL) has won again–in more ways than one.
The tech giant has pushed aside one of the world’s most aggressive competition chiefs after winning its €13 billion tax battle.
Its victory comes just after the stock hit an all-time high.
Apple’s stock hit an all-time high just a day before its tax victory. | Source: Yahoo Finance
Apple’s stock has surged during the lockdown as people turned to their devices while being stuck at home.
Now that it has overcome this huge tax battle, there appear to be no obstacles in sight.
Margrethe Vestager, the European Commissioner for Competition, claimed the iPhone maker’s effective 1% tax rate in Ireland amounted to illegal state aid.
That being said, the EU General Court–Europe’s second-highest court–has ruled in favor of Apple. The win is likely to mean more than meets the eye.
Short sellers back off
Investors betting against the meteoric rise in Apple’s shares have now been officially burned.
The number of shares being used to short AAPL–i.e., bet on its decline–has nearly halved since November 2019. Now less than 1% of its shares are being used to short the stock, according to Bloomberg data.
Short sellers have been burned as Apple’s stock continues its meteoric rise. | Source: Bloomberg
Anyone hoping the EU tax case might make it stumble will now be feeling the pain.
The company undeniably faces far less regulatory risk than many smaller firms might, which can only support its shares.
Irish politician Paul Murphy questions his country’s decision to fight with Apple. | Source: Twitter
If Apple can convince a country to fight against securing billions of euros in tax, it possesses a power few other firms have.
A lockdown darling
Beyond this, Apple flourished during the lockdown.
With millions of people prevented from leaving their homes, they turned to their devices.
Economic trends that were already underway have been accelerated and galvanized by the pandemic.
The digitalization of our economy has been expedited, and that is unlikely to reverse.
Apple–alongside its major tech peers–has been responsible for a massive percentage of the gains in the S&P 500 index. Source: Minack Advisors/LinkedIn
Looking at the S&P 500 Index, it’s clear the benchmark wouldn’t be near where it is today without Apple, Amazon, Alphabet, Facebook, Microsoft, and Netflix.
BofA ups Apple’s target stock price
While investors will undoubtedly see Apple’s tax win as a positive, it might not have mattered even if it had lost.
The Bank of America has just upped its price target for Apple to $410 a share from $390, and the tax victory is one of many factors.
Revenues at Apple’s App Store have risen more than 23% so far this year compared to the same period in 2019. Downloads were up massively–including in China–and the spend per download also rose.
Besides the App Store revenue growth, Apple’s inventory of iPhones has dropped, meaning demand has risen. Apple commands brand loyalty like few others.
In addition to its name and growth story, Apple’s stock is also becoming popular with investors as a portfolio tool.
Investors see the stock as a haven like they view a U.S. Treasury. Apple’s dividend is higher than the yield on government debt, so investors are driven to the stock.
Apple has beaten tax campaigners, competition watchdogs, and the pandemic. It has overcome its own warnings of a bump in the road. It’s hard to see what can stop Apple now.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the stocks mentioned.
Last modified: July 15, 2020 11:34 PM UTC